US Treasuries Slide as Escalating Iran Tensions Spark Global Bond Rout

Global bond markets plunged on March 3, 2026, as fears of a broader regional conflict involving Iran intensified, pushing US 10-year Treasury yields to 4.87%—a rise of 18 basis points in a single session. The sell-off extended beyond US debt, with German 10-year bund yields climbing to 2.94% and UK gilts experiencing similar pressure. The spike in Treasury yields reflects a rapid repricing of risk, as investors shifted from safe-haven assets to higher-risk alternatives amid growing uncertainty. The escalation stemmed from reported military strikes near the Strait of Hormuz, disrupting maritime traffic and raising concerns over potential oil supply disruptions. As a result, crude oil futures (CL=F) surged 7.3% to $89.40 per barrel, reflecting fears of supply constraints. The energy sector responded with immediate volatility, with ExxonMobil (XOM) and Chevron (CVX) shares rising 4.1% and 3.7% respectively on heightened risk premium expectations. Market volatility surged as the CBOE Volatility Index (^VIX) jumped to 28.4, its highest level since November 2024. This marks a 42% increase from the prior session and signals a sharp rise in investor anxiety. The defense sector also reacted, with Lockheed Martin (LMT) and Raytheon Technologies (RTX) gaining 5.2% and 4.6%, respectively, as geopolitical risk premiums began to factor into long-term defense spending outlooks. The broader equity market showed mixed results, with the S&P 500 dipping 0.9% as investors weighed the macroeconomic impact of rising rates and supply shocks. Financials were particularly pressured, with the KBW Bank Index falling 1.8% as higher Treasury yields compress profit margins on fixed-income holdings.